Putin: Russia must use surplus for foreign debt

MOSCOW -- President Vladimir Putin insisted Saturday that Russia should make paying off its staggering foreign debts the top economic priority, and deal with public spending needs later.

''The longer we drag out the payment of our foreign debts, the more they cost us,'' Putin said during a visit to a prosthesis factory just north of Moscow, in response to appeals from disabled lawmakers for more money on social spending.

Russia owes some $140 billion in foreign debt, most of it left over from the Soviet era. After years of decline, the country is now enjoying an unusual budget surplus, thanks largely to high world prices for oil, a major Russian export, and debate is heated over how to spend the windfall.

''There are different theories. One is to put social issues first, then the interests of the economy,'' Putin said, in footage aired on Russia's state-run RTR television. ''There is another philosophy. It is to first address problems that are burdening the economy, and not slide into new debts.''

Still, he promised an additional $2.5 million next year for Russia's disabled children and veterans, acknowledging that their needs were often ignored by previous cash-poor governments. The money is to come from his presidential fund, not the state budget.

Russian media called Putin's comment a rebuke to Prime Minister Mikhail Kasyanov, who rose to power largely by negotiating new debt and postponing old debt.

Speculation has been rife in recent weeks that Putin is dissatisfied with the government's economic policy and would soon fire Kasyanov.

Putin's comments came the day after Russia's lower house of parliament passed the government's 2001 budget on the third reading -- Russia's first balanced budget since the 1991 Soviet collapse.

Some complain the budget relies too heavily on assumptions that high oil prices will continue and that Russia can renegotiate payments on Soviet-era debt to nations known collectively as the Paris Club.